Weekly Technical Update from Kotak Securities Limited: The week past and expected:

According to daily and weekly chart the market has pause the trend nearing the major resistance of 14300/4200. It was quite obvious that the market would halt at major resistance as the run up was huge and uninterrupted. The correction of Friday was the biggest correction of the entire rally between 12425 and 14238 (3617 and 4217 nifty). Though it was severe it was highly needed as the rally was backed by only 15 stocks out of the basket of 50 stocks on Nifty (On the Sensex just 9 stocks out of the basket of 30 stocks) if compare the data of last three months. The sectors who have taken lead in the current rise were mainly Oil & Gas, Telecom, Metals and Power equipment. The momentum sectors like Technology, Auto and Cement stocks completely failed to participate and were underperformer to Sensex/Nifty by more than 10 %. This has resulted into total underperformance of Traders and Investors/MFs in the current move. The reason we are mentioning above analysis is that lot of funds and investors are still loaded with lot of cash or sitting on cash and they may use the current fall as an opportunity to invest into their desired sector. The focus may be to participate in those stocks or sectors which are already in limelight. In all this process the market will find concrete support in the coming days that will keep alive the possibility of crossing previous all time highs.

According to Fibonacci ratios the market has next major support in the range of 13800/13700 (4040-4000 for the Nifty). Buying in selective stocks with the medium term view is advisable. We will look for buying opportunity in Metals (Tata Steel below Rs.520.00, JSWSL between Rs.575 and Rs.565 and Sterlite Inds below Rs.510), Capita Goods and Power equipment (Siemens around Rs.1150, BHEL around Rs.2450 and BEML between Rs.990 and Rs.980), Oil and Gas ( Reliance Industries between Rs.1535 and Rs.1515, Reliance Petro around Rs.78 and IOC around Rs.420) and Telecom (Reliance Communication below Rs.450) Banking and Cement sector showed lot of resilience at lower levels and recovered smartly from lower levels. We will look particularly at Bank of India, SBI, ICICI Bank and ACC. Auto and Technology are struggling hard to sustain at higher levels but as the market seems to be recovering from lower levels we may look for Satyam Computers and Maruti Udyog as the best bets to trade in. Amongst mid caps 3I infotech, Indian Bank, Balaji Telefilms and SKF India may give decent returns on investments with the medium term perspective in mind.

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